Grocery prices rising at slowest pace for eight years

Price war drags down supermarket prices as discounters grab shoppers

Grocery prices are growing at the slowest pace for at least eight years as the price war among supermarkets helps to ease the pressure on British households.

Grocery inflation was just 0.8pc in the 12 weeks to June 22, the lowest level recorded by Kantar Worldpanel since it began studying the figure in 2006.

Prices are being dragged down by a slowdown in commodity prices, the increasing proportion of sales that are coming from Aldi and Lidl, and cuts to shop prices by the leading supermarkets as they try to halt the rise of the German discounters. Inflation has now fallen for nine months in a row.

Fraser McKevitt, consumer insight consultant at Kantar, said: “The low grocery price inflation this period will be welcome news for household budgets. The outlook is positive as we predict continuing sub 1pc levels into the near future, providing some relief for cash-strapped consumers."

However, while the slowdown in inflation is helpful to shoppers, it is adding to the challenges facing the "big four" supermarkets, Tesco, Asda, J Sainsbury and Wm Morrison. The biggest retailers are attempting to cope with shoppers switching their spending from out-of-town supermarkets to discounters, convenience stores, and the internet.

The Kantar data shows that in the last 12 weeks Aldi grew sales by 35.4pc while Lidl increased by 22.3pc. Aldi and Lidl now account for a combined 8.3pc of grocery spending, compared to 6.7pc a year ago.

This is in stark contrast to Tesco, which suffered a 1.9pc fall in sales and as a result saw its market share decline from 30.3pc to 28.9pc. Morrisons sales fell 3.8pc, reducing its market share from 11.7pc to 10.9pc.

The best performing major supermarket retailers was Asda, which was the first of the "big four" to commit to widespread price cuts late in 2013.

Asda sales grew 3.6pc in the 12 weeks, taking its market share from 16.9pc to 17.1pc. Sainsbury's also enjoyed a robust period of trading, with sales growing 3pc and its market share increasing from 16.6pc to 16.7pc.